A married couple who were owners of corporate accounts with Celsius have submitted a request for an additional disbursement from the bankruptcy proceedings. This stems from the allegation that they, along with other creditors, received a 35% lower payment compared to non-corporate accounts.
The formal motion was lodged on June 3, and there is a scheduled hearing to review it on June 27. This action follows a series of complaints from corporate creditors who assert that Celsius debtors postponed payments to corporate accounts and opted for cash payments instead of cryptocurrency, resulting in financial losses for said creditors.
As per the filing, four entities—BFaller RD, BFaller ROTH RD, SFaller TRD RD, and SFaller RD, together known as the “Faller Creditors”—are seeking approval for further disbursements within the Celsius bankruptcy arrangement. These four entities are Individual Retirement Accounts (IRAs) held by Sheri Anne Faller and Bernard Jacob Faller, as per business records in California.
These IRAs collectively held over $1 million in cryptocurrency in their Celsius accounts before the platform’s bankruptcy declaration. The bankruptcy plan altered this amount to $634,337.93 worth of Bitcoin (BTC) and Ether (ETH) to be dispensed on January 16. This equated to 7.38 BTC and 123 ETH due to the two individuals.
However, the Celsius debtors purportedly failed to remit the payments by the specified date. On January 19, a Celsius representative informed the couple that they couldn’t receive crypto payments since their accounts didn’t rank among the first 100 corporate Celsius accounts in terms of asset value. Consequently, the crypto had to be exchanged for cash and disbursed through conventional banking channels.
Initially, the couple consented to accepting the cash equivalent of their crypto on January 19. Yet, as alleged by the creditors, the debtors didn’t fulfill this agreement. On February 13, the creditors requested crypto payments due to the delays. In response, the debtors reiterated that they weren’t eligible for crypto payments based on their creditor ranking.
Finally, on February 22, the creditors received a wire transfer of $414,733, although they couldn’t withdraw these funds until March 8. Subsequent payments totaling around $219,602 were made on April 22, summing up to $634,335.
The couple asserts that the cash payments fall significantly short of the crypto’s value they were owed, based on prices at that time. By their calculations, they should have received $973,955, equivalent to the BTC and ETH promised. Thus, they are demanding an extra $338,611 along with $11,984 in interest for the delayed distribution, totaling $350,596.
The Faller creditors are not alone in their grievances against Celsius, with other corporate creditors also having expressed dissatisfaction with their treatment compared to top corporate accounts or individuals. In response to previous claims, Celsius Estate clarified that it had sold users’ crypto on January 16 and was thus unable to pay out crypto it no longer possessed. The estate contended that selling the crypto was a necessity as per the bankruptcy plan.
Furthermore, it was asserted that corporate accounts entail a more stringent compliance process, hindering account acquisition for the majority of corporate creditors.
In counter to these assertions, the new filing argues that the estate failed to make adequate efforts in providing corporate creditors with accounts. Notably, it alleges that the estate didn’t explore other possible cryptocurrency distribution avenues aside from Coinbase and PayPal, such as Kraken and Bitgo, which could have facilitated broader and swifter disbursements to creditors.
The document also criticizes the three-month delay between converting the crypto into fiat and actual payments, deeming it an unreasonable timeframe as per the bankruptcy plan.
A pivotal hearing is scheduled for June 27 at 10 am EDT to examine these issues further.
Celsius, a crypto lending platform established in 2017, halted withdrawal services in June 2022, leading to an approximate $2.8 billion of customer cryptocurrency being inaccessible. The platform’s founder and former CEO, Alex Mashinsky, faces seven counts of fraud for his alleged role in the platform’s demise, with his trial slated for September.
Since declaring bankruptcy in July 2022, Celsius has settled over $2 billion of creditor claims, as per a court filing on February 15. The majority of creditors have purportedly received their crypto payments without issues, as stated by the platform’s estate.